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ABC bond is a risk-free, zero-coupon bond. It has a face value of $5000 and will...

ABC bond is a risk-free, zero-coupon bond. It has a face value of $5000 and will mature in 15 years. Currently, the bond is trading at the market price of $3750. What is the yield to maturity of this bond?  

Select one:

75.000%

62.500%

1.936%

0.968%

Solutions

Expert Solution

Answer :1.936%

Calculation :

YTM of ZCB = [(Face Value/ Market Value)^1/n ] - 1

YTM of ZCB = [(5000/3750)^1/15] - 1

By solving,

YTM of ZCB = 1.936%

jeff jeffy answered 2 years ago
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